State Farm faces tiny fines after 398 violations found

State Farm insurance may have violated the law repeatedly when it swindled thousands of policy holders by limiting insurance payouts after the 2025 fires. But California state law limits the amount that State Farm can be fined for violating the law to a relatively tiny amount.

State regulators released a report Monday that claims a staggering 398 violations of state law in the 220 sample claims they looked into.

Slow and inadequate investigations. Underpayments of claims. Assigning multiple adjusters causing confusion and delay. Denied claims for smoke damage remediation, despite a state law that requires it.

State Farm cheated on almost every policy claim that the state looked at.

California is the nation's largest insurance market, and State Farm holds 1 out of every 5 policies in the state. This state is a vast market, very lucrative to any insurance company.

But state law limits the state to penalizing State Farm to just $5,000 per violation. That means a total fine of about $2 million — small peanuts for a company that made almost $13 billion in profits last year.

One policy holder, who still can't move back into her smoke-damaged house, talked with ABC7 last night. Her name is Hannah Valverde.

"At State Farm for 35 years, never made a claim — that like a neighbor they would be there for me if something terrible happened. And no, you know, we have fought and mail every step of the way," Valverde said.

The State Farm policyholder, who lives in Altadena, told ABC she's glad the state has recognized the plight of her and other State Farm policyholders.

"It seems like a slap on the hand, but I'm happy that at least someone is stepping in and saying that State Farm has not been playing fairly at all," she said.

But could the trouble in California cause State Farm to stop writing policies here? Amy Bach is an industry critic. She also talked to ABC7.

"It certainly could happen, but they have a lot invested here. I mean, they went one out of every five — so this is a big market for them. I think the message is to State Farm here, is that taking shortcuts on claims is not the way to make up for the fact that you have not been allowed to charge what you think you should be charging," Bach said.

Senator Ben Allen is running for State Insurance Commissioner. He says he urged for this investigation last year, when his Palisades and Malibu constituents began complaining of unfair treatment by State Farm.

A spokesman for the company says they "reject any suggestion State Farm engaged in a general practice of mishandling or intentionally underpaying wildfire claims."

Many of the claims against State Farm were revealed in a series of investigative news reports in the San Francisco Chronicle. Yesterday, the San Francisco Chronicle won the Pulitzer Prize for explanatory journalism.

The comprehensive investigation showed that major insurance companies, led by State Farm, left wildfire victims unable to rebuild after catastrophic wildfires, even when they had what they thought was full coverage. The series found that major insurance companies use faulty algorithms and hidden cost-cutting schemes to drastically underpay survivors. This threatens the recovery and health of whole communities.